Regarded as the "king of cheeses" in Italy, parmigiano reggiano is nonetheless a monarch of the people, frequenting dinner tables across Italy each day. But the crown has slipped under pressure from oversupply, falling prices and an international identity crisis.

It’s a clear winter morning at Baganzolino, a small village five kilometers outside Parma in northern Italy, and local dairy farmers have finished the first milking of the day. Their milk vats clang as they are unloaded at the caseficio – cheese factory – operated by the local cooperative.  A river of milk cascades down the stainless steel separating tables, through the channels of pipes and into the part-skimmed evening milk waiting in the large copper vats. It will take 600 liters of milk to make one wheel of parmigiano reggiano and spring is the highest production period.

Cheesemaker Bruno Monica presides over the process, a role this casaro has held for four decades. But the tradition he carries is much longer: eight centuries ago in the Po Valley of Emilia Romagna, Benedictine monks were producing this cheese. Since then, parmigiano reggiano has been made by essentially the same recipe, proudly proclaimed as a combination of milk, rennet, fire and art.  That long history of production has tied this cheese to its region and earned its status as a product of protected designation of origin (PDO). That mark gives consumers confidence the cheese is produced to rigorous, consistently high standards of quality and taste.

The Po Valley is built on a combination of industry and agriculture. Once covered by the Adriatic, it was eventually filled by rocks washed down from the nearby Appenines. The sea and mountains formed plains rich in mineral salts, which became the production area for parmigiano reggiano.  The "king of cheeses" can only be made in the provinces of Parma, Reggio Emilia, Modena, Bologna to the west of the Reno River and Mantua to the east of the Po River. The milk must come from cows raised in this area on grasses and natural vegetable feed grown here, and the cheese must be made, stored and packaged here.

In recent years, the industry has moved away from cooperatives and towards private production. As a result, almost a third of the dairies that produced milk for parmigiano reggiano in the early 1990s no longer exist. Production has doubled as a result, due to more efficient operative sizes.

Farmers like Paride Zoni rear mostly Fresians, although the traditional local breed Vacce Rosse is making a minor comeback. On the outskirts of Parma, Zoni is carrying on a family tradition. His farm was bought by his father, the first generation of his family to make the transition from laborer to landowner.  Today, he has 200 cows producing milk for parmigiano reggiano.

Challenges of today's market

Today, at  Parola di Fontenallato, a warehouse where cheese aging takes place,  the president of the local cooperative watches as an inspector assesses some 1,200 cheeses for sale to a wholesaler. The president emphasizes the vagaries of production, pointing to the many hands that have a role in making the cheese. Not to mention the ability of the inspector to assess the cheese appropriately. It’s a show of gamesmanship at a time when the market is struggling.

This is, after all, a finely tuned and expensive waiting game.  While the cheese matures, the producers earn nothing so the Italian Government subsidizes them to keep their cheeses longer. This ensures there are older cheeses on the market and helps maintain prices. But the subsidy runs out at the end of 2007, a looming financial loss that adds to the pressure the producers of parmigiano reggiano are already facing.

If ever there was a difficult year for parmigiano reggiano, it was 2005-06. Ongoing increases in milk volume due to industry restructuring translated into strong growth in production of parmigiano reggiano, peaking in 2005 at 3.14 million wheels. That’s an increase of a quarter of a million cheeses in just four years. In 2006, as these cheeses reached maturity and the market, they created a glut.

At the same time, the supermarkets and hypermarkets were exerting their influence, which now accounts for two-thirds of sales. Their buying power led a downturn in the wholesale price of a wheel of parmigiano reggiano. In 2002, the average price was 8.18 Euros/kg; in September 2006 it fell to just 6.79 Euros.  According to the Consortium, returns to the producers reached unsustainable levels. They received only 0.38 Euros for each liter of milk, 0.07 Euros less than the cost of production.

Suddenly the king was in danger of becoming the pauper. But the change did not benefit consumers who continued to pay on average 13-14 Euros/kg. In other words, the price gap – the amount being kept by wholesalers – increased from 4.53 Euros/kg in 2002 to 6.95 Euros in late 2005. That meant less than half the price consumers paid was going to producers.

Slow Food supported the producers, with Renato Sardo of the Foundation for Biodiversity accusing distributors and their “aggressive promotion strategies” of jeopardizing the appeal of parmigiano reggiano and leading to its perception as a commodity product.  The crisis called for strong action from the Consortium of Parmigiano Reggiano. In late 2005 it published a five-year productivity plan to develop the market and improve quality, commencing in 2006.

Its first aim was to reduce production to sustainable levels. It’s working. Production fell in 2006 and the number of cheeses in storage reduced by 10% as sales regenerated. Prices are also looking positive for 2007.  The plan also sought to identify new market opportunities, particularly for exports which account for just 17% of production. While three quarters of sales are to Italy’s neighbors in the European Union, demand is growing from the UK, Greece, Japan and Canada, and although the exchange rate has restrained the US recently, it is a relatively untapped market.

The challenge in these markets is to overcome parmigiano reggiano’s international identity crisis. While many consumers are familiar with parmigiano’s pseudonym parmesan, it’s often associated with imitations. The Consortium has a legal officer working fulltime to protect the use of the brand internationally. But it can be a difficult battle to win, particularly against the power of Kraft.

A differentiation strategy could also make inroads within Italy. It’s certainly a ripe market: Slow Food’s Piero Sardo says “for Italians, grana-type cheese is like mother. It is the first great love of our lives.”  While competition from low price imports is growing, demand for parmigiano reggiano also rises. A marketing strategy is required that builds the esteem of the cheese and ensures it is no longer taken for granted by its Italian family. 

At the beginning of 2007, the future reign of the king of cheeses is much more positive than a year earlier. Decisive action by the Consortium, while arguably a little late, has set a clear path for the future. Well managed growth and quality of production, combined with new markets and improved promotion seem set to assure parmigiano reggiano’s place as one of the great cheeses of the world. Long live the King!